ECON 2106
Same link as earlier
Same link as earlier
\(e = \dfrac{\% \Delta q}{\% \Delta p} = \dfrac{\frac{q_2 - q_1}{q_1}}{\frac{p_2 - p_1}{p_1}}\)
\(e_{xy} = \dfrac{\%\ \Delta Q_x}{\%\ \Delta P_y}\)
Cotti et al. (2022): > “We estimate the effect of e-cigarette tax rates on e-cigarette prices, e-cigarette sales, and sales of other tobacco products using NielsenIQ Retail Scanner data from 2013 to 2019. We find that 90% of e-cigarette taxes are passed on to consumer retail prices…”
Cotti et al. (2022): > “…We then estimate reduced form and instrumental variables regressions to examine the effects of e-cigarette and cigarette taxes and prices on sales. We calculate an e-cigarette own-price elasticity of -2.2 and a particularly large elasticity of demand for flavored e-cigarettes…”
Cotti et al. (2022): > “Further, we document a cigarette own-price elasticity of -0.4 and positive cross-price elasticities of demand between e-cigarettes and cigarettes, suggesting economic substitution.”
Just a silly video was shown here
Pecuniary effects: actions change prices faced by others (consumption reallocation).
Externalities: actions change others’ production/consumption possibilities directly (e.g., damage, health, productivity).
If Tesla and Ford compete, they also compete for workers.
A factory pollutes a river → fishing becomes harder/costlier.
Profits incentivize innovation — firms develop new technologies to gain a competitive edge.
However, in some cases, competition can discourage innovation, especially when:
One policy solution is to extend intellectual property (IP) rights, which grant inventors the exclusive legal right to make, use, or sell their invention for a limited time.
When fixed costs are high, subsidies can be extremely expensive
Often firms care about the rate of return:
Suppose: \(RR_{pfizer} = (\$10 * 100b) / (\$14b + \$9.5 * 100b) - 1 \approx 3.73%\)
Public goods are non-excludable and non-rival in consumption.
| Type of Good | Excludable | Rival |
|---|---|---|
| Private Good | ✓ | ✓ |
| Public Good | ✗ | ✗ |
| Club Good | ✓ | ✗ |
| Common Good | ✗ | ✓ |
| Category | Examples |
|---|---|
| Private Goods | |
| Common Goods | |
| Club Goods | |
| Public Goods |
| Category | Examples |
|---|---|
| Private Goods | Phones, Groceries, Shoes |
| Common Goods | Roads, Fish, Parks |
| Club Goods | Security, Wi-Fi, Concerts |
| Public Goods | Gravity, National Defense, Disease Control |
Some key sources of public goods problems include:
Example: In the case of tuna, the stock of fish is the common resource — rival but non-excludable (especially in international waters)
When fish stocks become depleted, governments may impose shorter fishing seasons.
Example: In the case of tuna, the stock of fish is the common resource — rival but non-excludable (especially in international waters)
Cultural norms
Link here
Example: The stock of tuna is a common resource — rival but non-excludable (especially in international waters).
To address overuse, many governments establish Individually Transferable Quotas (ITQs):
Similar idea: Cap-and-Trade systems, which apply the same property-rights principle to pollution permits.